Unwanted staff turnover - the most ignored shadow costs.

Staff turnover can take several forms, including internal movement, where employees move from one position to another, and external movement, where employees leave the company altogether. Internal movement is per se a sign of an employee’s progress, but also generates costs and potential disruption, as the position must be refilled and the successor retrained. External movement is even more costly, as not only valuable know-how is lost, but also resources have to be spent on finding a replacement and training.

There are a number of factors that can contribute to unwanted staff turnover, and they often vary from company to company. Some common causes include a lack of job satisfaction, a feeling of being undervalued or unappreciated, or a mismatch between expectations and reality. Other possible causes include a lack of training or development opportunities, a lack of career progression, or a lack of job security. Very often, turnover can also be related to workplace culture or issues with management.

One other reason for unwanted staff turnover is inadequate compensation and benefits. If employees feel that they are not being compensated fairly or that their benefits are lacking, they may seek employment elsewhere. However, interestingly, compensation is a hygiene factor and it is not possible to retain people who want to leave with a salary increase in the long run.

Involuntary turnover entails a significant financial cost for companies. Let us illustrate with an example from our consultancy practice:

Do you want to quickly estimate roughly how high the costs are at your company?

At AGILIS, we have developed a tool that can be used to calculate the costs of unwanted staff turnover based on a few parameters that need to be entered:

However, staff turnover not only carries a direct financial cost, but can also negatively impact a company’s operational efficiency. For example, frequent turnover of staff can prevent a company from implementing and maintaining key processes and policies. When employees leave frequently, the company falls short of its goals and runs the risk of continuing in a vicious cycle of inefficiency.

How to counteract turnover?

Staff turnover is a serious challenge for companies, but there are ways to counteract it. For example, it is important that managers have a clear understanding of what employees are looking for in a workplace and try to meet those needs as much as possible. This includes aspects such as opportunities for promotion, work-life balance and interesting projects. Managers should also build and maintain close relationships with their employees in order to be able to identify and solve potential turnover problems as early as possible.

In very many cases, however, managers can only fight staff turnover to a limited extent, as the problem lies at another level: bad working climate and a negative, incoherent and sometimes toxic company culture. It is not enough, in this case, to simply replace a manager or even the CEO - the problem must be addressed at the system level. This is best done as part of a comprehensive programme to define and implement a new corporate culturethat preserves the tried and tested but modernises and unifies the culture.

Of course, such programmes generate some costs, but these are often more than offset by the elimination of some of the turnover costs. In the case mentioned above, AGILIS was allowed to implement a nine-month culture transformation programme, and within 12 months turnover had dropped to a healthy 4.8%. Return on investment was achieved within 9 months of the project, giving the company not only a real long-term cost advantage, but also significantly increasing productivity at the same time.